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  •   Notable Unreported Decision

Godden v State of Queensland

 

[2018] QSC 18

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Godden v State of Queensland & Ors [2018] QSC 18

PARTIES:

ALAN LESLIE GODDEN

(applicant)

v

STATE OF QUEENSLAND

(first defendant)

NORTHBUILD CONSTRUCTION PTY LTD

(second defendant)

GOLD COAST CITY COUNCIL

(third defendant)

NORTHBUILD FM PTY LTD

(fourth defendant)

KEENTEX PTY LTD

(fifth defendant)

LUMLEY GENERAL INSURANCE LTD

(respondent)

FILE NO/S:

BS No 4171 of 2011

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

14 March 2018

DELIVERED AT:

Brisbane

HEARING DATE:

15 January 2018

JUDGE:

Martin J

ORDER:

  1. The Applicant has leave to join Lumley General Insurance Ltd as a Defendant.
  2. Costs reserved.
  3. The Applicant is to bring in minutes of order within five days of this decision being delivered.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JOINDER OF CAUSES OF ACTION AND PARTIES – PARTIES – GENERALLY – where the applicant plaintiff seeks leave to join insurer of fourth defendant – where declaration sought that respondent be liable to indemnify insured – where insured defendant has been refused indemnity – where insurer respondent denies that it is liable to indemnify – where the insured defendant either accepts that the insurer respondent is correct in declining to indemnify or effectively withdraws – whether the insured defendant is capable of satisfying any judgment that it might suffer – whether there is a bona fide dispute as to the entitlement of the insurer respondent to deny liability – whether there is a true legal controversy between the applicant plaintiff and the insurer respondent – whether there is a realistic prospect of s 562 of Corporations Act 2001 having scope for operation Corporations Act 2001

Motor Accident Insurance Act 1994

Personal Injuries Proceedings Act 2002

Uniform Civil Procedure Rules 1999

Anjin No 13 Pty Ltd v Allianz Australia Pty Ltd (2009) 26 VR 148

CGU Insurance Limited v Blakeley (2016) 259 CLR 339

Employers Reinsurance Corporation v Ashmere Cove Pty Ltd (2008) 166 FCR 398

Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120

Godden v State of Queensland & Ors [2016] QSC 224

Interchase Corporation Limited (in liq) v FAI General Insurance Company Limited [2000] 2 Qd R 301

JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432

The Owners-Strata Plan 62658 v Mestrez Pty Ltd [2012] NSWSC 1259

COUNSEL:

R Myers for the applicant

R Dickson for the respondent

SOLICITORS:

Shine Lawyers for the applicant

HWL Ebsworth for the respondent

  1. The applicant alleges that he was injured when, in May 2008, he lost control of the motorcycle he was riding and it fell onto the surface of the road. He claims that the accident was caused by dust or debris which had been deposited on the road by trucks and machinery engaged at a nearby building site.
  2. There are five defendants to his claim but only the fourth is relevant to this application. It is the insured in a contract of insurance with Lumley General Insurance Ltd[1] – which the applicant seeks to join as the sixth defendant.

The insurance policy

  1. The applicant pleads that:
    1. the fourth defendant, Northbuild FM Pty Ltd,[2] had been retained by the second defendant to perform the earthworks and the civil works at the building site, and
    2. that Northbuild was negligent in that, among other things, it failed to ensure the roadway was free from hazards caused by construction work and failed to implement an adequate system for cleaning the trucks, vehicles and machinery which left the worksite.
  2. At the relevant time, Northbuild was party to a contract of insurance with Lumley. The policy was styled: “Annual Contract Works, Plant and Equipment and Third Party Liability Insurance Policy”.
  3. The second defendant has made a claim for indemnity or contribution against Northbuild. The claim was based on the contract said to have been in existence between the second defendant and Northbuild at the relevant time. Lumley has denied that it is liable to indemnify Northbuild.

The attitude of Northbuild

  1. Northbuild did not take any action against Lumley over its declinature. Lumley contends that this demonstrates that Northbuild accepts that the policy does not cover it in the circumstances.
  2. In September 2012, Northbuild applied to the Australian Securities and Investments Commission to be deregistered. It was. In November 2013, the applicant obtained an order from this court requiring the reinstatement of Northbuild to the register held by ASIC. This is relevant to the issue, considered below, of Northbuild’s capacity to satisfy any judgment which might be entered against it. Upon deregistration, a company ceases to exist. If it has any property, it will vest in ASIC.[3]
  3. Upon Northbuild being restored to the register had any property vested in ASIC then it would have, by virtue of the re-registration, revested in Northbuild.
  4. Since it was restored to the register, Northbuild has filed particulars of changes of officers, places of business and so on with ASIC. Lumley argues that this is some evidence that Northbuild is still functioning or, at least, is not moribund.
  5. Northbuild has a paid up capital of $102. Lumley led evidence that Northbuild’s sole shareholder – the second defendant – had, according to a company extract of 12 January 2018, a paid up capital of $1,420,000. It also exhibited to an affidavit some screenshots from the website of www.northbuild.com.au. There was some material which demonstrated that the second defendant is involved in a number of matters in this court. But, none of that says anything about the liquidity of Northbuild. The possibility that, on a voluntary deregistration, Northbuild had any property which would have vested in ASIC is so remote as to be fanciful. I am of the opinion that it is more likely than not, that Northbuild had no property at the time of deregistration. There is no evidence to suggest that it has obtained any assets since re-registration.
  6. There is no direct evidence about the capacity or lack of capacity of Northbuild to meet an award of damages should one be made. Lumley submits that the evidence which is available does not support an inference that Northbuild would be incapable of meeting any such award. I do not accept that. The evidence of deregistration and the absence of any other evidence allows such an inference to be drawn.
  7. I also note that Northbuild was represented by solicitors in this action until June 2016 when it filed a Notice of Acting in Person. While that is not conclusive of anything, it does, when weighed in the balance, add some weight to the inference I have drawn.
  8. In July 2014, the applicant was granted leave to commence proceedings against Northbuild under the Personal Injuries Proceedings Act 2002. Those proceedings have been stayed pending the completion of the court process.

The application for joinder

  1. The applicant seeks leave pursuant to r 69 of the Uniform Civil Procedure Rules 1999 to join Lumley as the sixth defendant in these proceedings. If leave is granted, the applicant will seek a declaration that Lumley is liable to indemnify Northbuild under Lumley’s policy of insurance with Northbuild in respect of any judgment and costs order obtained by the applicant against Northbuild.
  2. Rule 69 relevantly provides:

“(1) The court may at any stage of a proceeding order that—

  1. any of the following persons be included as a party—
  1. a person whose presence before the court is necessary to enable the court to adjudicate effectually and completely on all matters in dispute in the proceeding;
  1. a person whose presence before the court would be desirable, just and convenient to enable the court to adjudicate effectually and completely on all matters in dispute connected with the proceeding.”
  1. The applicant contends that:
  1. the lack of involvement by Northbuild with respect to the insurance policy will mean that, if it is found liable or partially liable, there may need  to be another proceeding to seek relief against the respondent;
  2. it would reduce the costs of the matter if Lumley were before the court because it would allow for the adjudication on all matters in dispute in connection with the proceeding;
  3. the inclusion of Lumley would ensure that issues which are common to all parties are determined once and for all in one proceeding.

What jurisdiction is the court exercising?

  1. The power conferred by r 69 is to be exercised on the basis that the Court has jurisdiction with respect to the proceedings so far as they relate to the party to be joined – CGU Insurance Limited v Blakeley.[4] It is not itself a source of jurisdiction. A power given to a court or tribunal may be employed only in order to exercise its jurisdiction and “[t]he power given to the Court [or tribunal] may inform the characterisation of its jurisdiction but does not necessarily define its content.[5]
  2. On an application of this nature, an applicant should support its application by providing the court with a draft of the pleading which it proposes to file if the order is granted. That assists the court to determine the nature of the claim and, in turn, whether it attracts federal jurisdiction or not. Regrettably, no draft pleading was provided, only the relief which would be sought was identified.
  3. The applicant did not specifically address the question of jurisdiction. However, it did base its case upon the availability of s 562 of the Corporations Act 2001. If that section is available, then the Court would be exercising federal jurisdiction.[6]
  4. The applicant seeks to overcome the difficulty that it is not a party to the contract of insurance between Northbuild and Lumley by calling in aid s 562. That section provides:

“(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556.”

  1. The applicant relies on the High Court’s decision in CGU Insurance Limited v Blakeley on the basis that it demonstrates that this court is vested with the appropriate jurisdiction to adjudicate the dispute between the applicant and Lumley. The applicant submitted:

“In accordance with the High Court’s view in CGU, the court will, therefore, be vested with the appropriate jurisdiction to adjudicate the dispute between the Applicant/ Plaintiff and the Respondent as the court is applying [S]tate subject matter in respect of a justiciable dispute, the justiciability of which arises by virtue of the legal consequence mandated by s 562 of the C[orporations] A[ct].”

  1. The applicant likens the case at hand to the situation in Blakeley. A brief description of the issues arising in Blakeley can be found in the judgment. This will assist comprehension of the reasoning in that decision:

“[2] On 9 April 2013, the liquidators of Akron Roads Pty Ltd (In liq) (Akron) commenced proceedings in the Supreme Court against three former directors of the company including Mr Trevor Crewe. Also named as a defendant was Crewe Sharp Pty Ltd (In liq) (Crewe Sharp), a company of which Mr Crewe was a director and which provided consultancy services to Akron. The liquidators allege that Crewe Sharp was a director of Akron within the extended meaning of “director” in s 9 of the Corporations Act 2001 (Cth) (the Act).

[3] The liquidators sought an order under s 588M(2) of the Act that the directors and Crewe Sharp pay to them, as a debt due to Akron, an amount equal to the amount of loss or damage suffered by creditors of Akron in relation to debts owed by Akron because of its insolvency. The cause of action created by s 588M is enlivened by a breach on the part of a company director of the duties imposed by s 588G of the Act to prevent the company incurring debts when it is insolvent or if it would become insolvent by incurring the debts and where there are reasonable grounds for suspecting that the company is or would become insolvent. The liquidators alleged that Mr Crewe and Crewe Sharp breached that duty by failing to prevent Akron from incurring debts when it was insolvent.”

  1. Crewe Sharp made a claim on its insurance with CGU. It was declined on the basis of an exclusion in the policy. Soon after that, Crewe Sharp entered into a creditors’ voluntary winding up. And, soon after that, Crewe Sharp’s liquidators informed Akron’s liquidators that it was unlikely that Crewe Sharp would defend the claim. In addition, while Mr Crewe was not a bankrupt, it was accepted that his assets would not be sufficient to satisfy the claim brought against him by Akron’s liquidators. In that event, the cognate provision in the Bankruptcy Act 1966 – s 117 – would have application.
  2. The argument in the case was summarised in this way:

“[67] As the Akron liquidators have submitted, their claim does not depend upon any incursion upon principles of contract law or privity of contract. They are not claiming as a party to the insurance contract nor as persons otherwise entitled to the benefit of that contract. Their claim is based upon the legal consequence created by s 562 of the Act in the event that CGU is liable to indemnify Crewe Sharp and, more contingently, s 117 of the Bankruptcy Act in the event that CGU is liable to indemnify Mr Crewe and he becomes a bankrupt. That legal consequence would be the bringing into existence, in favour of the Akron liquidators, of a right to the proceeds of the insurance policy payable to Crewe Sharp in respect of its liability to Akron. The interest upon which the claim for declaratory relief is based and CGU’s denial of liability under the policy are sufficient to constitute a justiciable controversy between the Akron liquidators and CGU involving a question arising under a law of the Commonwealth. Because of these statutory provisions, it is the Akron liquidators who stand to benefit (to the exclusion of Crewe Sharp and Mr Crewe) from the making of the declaration sought. It would be distinctly to ignore this reality if the liquidators’ interest in this regard could be defeated by reason of inaction on the part of Crewe Sharp and Mr Crewe against CGU given that the statutory provisions themselves deprive Crewe Sharp and Mr Crewe of all incentive to pursue a claim under the policy.”

  1. A precondition to the exercise of jurisdiction, then, is the applicability of s 562. Before it can apply, the applicant has to identify the criterion the satisfaction of which enlivens the exercise of the statutory power or discretion in question.[7]

Does s 562 of the Corporations Act apply?

  1. Section 562 is in Chapter 5 of the Corporations Act. That chapter deals with external administration of companies. Further, s 562 is within Division 6 of Chapter 5 which deals with the proof and ranking of claims in a winding up. The character of s 562 was considered by McPherson JA in Interchase Corporation Limited (in liq) v FAI General Insurance Company Limited[8] where his Honour said at 314:

“Section 562 does not, in express terms, say that it is concerned only with companies in liquidation; but it is clearly so confined. It appears in Part 5.6 of the Corporations Law, of which the provisions apply to winding up: see s. 513; it is concerned with priorities and the payment of claims against a company in a liquidation: see s. 555; and s. 562(1) is in terms a statutory direction addressed only to a liquidator to pay the insurance proceeds.” (emphasis added)

  1. McPherson JA went on to say, with respect to the facts of that case:

“It follows that it is only if the plaintiff were to succeed in obtaining judgment in the action against either of the two defendants, whose liquidator or trustee in bankruptcy were then to demand and to receive from FAI an amount in respect of its liability as professional indemnity insurer, that s. 562 of the Corporations Law … would operate to require that the amount, less expenses of recovering it, be paid to the plaintiff.”[9]

  1. I respectfully agree with the analysis of McPherson JA as to the applicability of s 562. Lumley argued that, as Northbuild was not in liquidation, the applicant could not rely on s 562. While Northbuild is not in liquidation now, the point at which s 562 can have application is if Northbuild falls into liquidation, incurs a liability (such as a judgment debt), and an amount in respect of that liability is received by it, or its liquidator. The benefit which would flow to the applicant under s 562 – if he were to be successful at trial – does not crystallise until the insurer pays out under the policy.
  2. Section 562 does not confer on a liquidator in the position of the Akron liquidators in Blakeley (let alone a plaintiff such as the applicant) a right of action against an insurer to enforce an insurance policy. The Akron liquidator’s interest would be hypothetical and contingent upon an insured successfully enforcing a right.[10]
  3. Do the circumstances which apply in this case permit such an order to be made?  In Anjin No 13 Pty Ltd v Allianz Australia Pty Ltd[11] Vickery J had to consider the position of two insured companies. One was in the process of being wound up and so, Vickery J observed, s 562 might well have become applicable in relation to any proceeds of the Allianz policy which came into the hands of the liquidator. The other company was no longer an operating commercial concern and had ceased trading. His Honour held that there was “at least the prospect of [it] being wound up”. He went on to join the insurer. The capacity to make such an order needs to be considered.

Declaratory relief against an insurer

  1. The applicant relied upon statements in CGU Insurance Limited v Blakeley[12] about the availability of declaratory relief of the type sought. In response, Lumley contended that I should apply the reasoning in Interchase Corporation Limited v FAI General Insurance Company Limited.[13]
  2. In Interchase Corporation Limited v FAI General Insurance Company Limited Interchase sued Colliers Jardine Pty Ltd and Tidbold (an employee of Colliers) claiming that he had negligently valued a large shopping complex. FAI was the insurer of Colliers and Tidbold and Interchase sought to join FAI to obtain a declaration that it was liable to indemnify them.  FAI was joined as a defendant. That joinder was set aside on appeal. Byrne J (with whom McPherson JA agreed) noted that “unless Colliers and Tidbold gain recourse to professional indemnity policies, they did not have assets sufficient to justify Interchase’s proceeding to trial.”[14] The gist of his Honour’s reasoning was:

“Interchase’s object in joining FAI is to obtain a declaration concerning FAI’s obligations to parties other than Interchase. What utility could attend such an adjudication? Interchase is not a party to the policy. The policy was procured for the protection of the insured, not for claimants against them like Interchase. Although Colliers and Tidbold may sue on the policy, Interchase has no entitlement under the general law or statute to enforce it. Of course, like every prospective judgment creditor, Interchase has a commercial interest in the capacity of judgment debtors to satisfy a money judgment. But the declaration sought — relief that relates exclusively to FAI’s liability to Colliers and Tidbold — could not directly affect any property, legal right or obligation of Interchase. Nor could it effectively determine FAI’s rights or duties. A judicial determination of the issues pertaining to Interchase’s claim for declaratory relief cannot shut out FAI from litigating about them again, as, for example, should Interchase’s damages claims succeed, in proceedings instigated by the liquidator or by Tidbold’s trustee claiming indemnity. The order for joinder does proceed on a contrary assumption: viz. that a question as to the rights and duties of insurer and insured is concluded by a judgment on such issues between Interchase and one or other of the insured. This, however, is not the law.”[15]

  1. That decision has been disapproved in Blakeley. In that case, the High Court held that the reasoning of Davies JA (who dissented) in Interchase and that of the Full Court of the Federal Court in Employers Reinsurance Corporation v Ashmere Cove Pty Ltd[16] should be preferred. As to Davies JA’s reasoning, the majority said:

“[41] Davies JA, in dissent, identified the question before the Court as a question of ‘power under the Rules of Court to order the joinder sought’ and whether the primary judge had erred in exercising his discretion to permit the joinder. A grant of declaratory relief would have utility as it would be an abuse of process for the insurer or the insured to litigate the question determined by the declaration in later proceedings. The declaration sought could therefore “effectively determine the question of [the insurer’s] liability to the valuers as between those parties.” The question was not hypothetical:

‘the insolvency of the valuers, their failure to seek an indemnity from [the insurer] and the ineffectuality of any judgment by [the plaintiff] against the valuers unless [the insurer] is liable to indemnify them — together combine, in my view, to give [the plaintiff] a real interest in the relief which it seeks.’”

  1. In Ashmere Cove the primary judge had joined two insurers to an action in which a group of investors had commenced proceedings to recover losses from KMF – the responsible entity (the insured) of a registered management scheme. On appeal, the insurers argued that the joinder did not involve an exercise of the judicial power of the Commonwealth because any declaration would not bind the insurers and KMF and, thus, there would be no “matter” for the purposes of Chapter III of the Constitution. Alternatively, if there was a “matter”, any declaration could not authoritatively determine the rights and duties of the parties to the contract of insurance.
  2. KMF was in liquidation and there were no funds available to meet any claims for compensation or damages. The insurers declined to indemnify KMF and the liquidator was unwilling to proceed against them. As in this case, the basis upon which the liquidators denied liability raised a discrete issue about the application of an exclusion clause in the policy. On appeal, the Full Court of the Federal Court held:

“[52] The Investors plainly have a real interest in establishing, if they can, that the Insurers are liable to indemnify KMF against the claims made against it by the Investors. Certainly they have standing to claim declaratory relief against the Insurers: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406. Even though the Investors are not at this point seeking orders directly against the Insurers (other than a declaration), they have a variety of steps open to them to secure the benefits of any indemnity available to KMF.” 

  1. On the issue of whether the discretion should have been exercised to join the insurers, the Full Court said:

“[66] The primary Judge found that the joinder of the Insurers in the proceedings would have practical utility. In our view, there was no error in that finding. As we have discussed in dealing with the constitutional issue, if the Investors succeed in obtaining a declaration the fact that it would bind the Insurers (as between them and the Investors) would be likely to lead to the Investors being able to take advantage of the indemnity available to KMF under the Policy.”

  1. The Full Court considered the application of the principle in Port of Melbourne Authority v Anshun Pty Ltd[17] and said:

“[68] … any attempt by the Insurers to relitigate their liability under the Policy in subsequent proceedings would give rise to an issue concerning the application of the Anshun principle. The outcome cannot be predicted with certainty, since it may be influenced by the course the trial takes. Nonetheless, the likelihood is that the Insurers would face formidable obstacles if they choose not to put forward all their defences in the current proceedings, or if they seek to reagitate issues that are the subject of adverse findings or holdings by the primary Judge.

[71] If the Insurers have a full opportunity to agitate any defence they wish to raise in answer to the Investors’ claim for declaratory relief (presumably they will have such an opportunity), it is difficult to see why the Anshun principle would not preclude them from relying on any such defence in subsequent proceedings involving the same parties. Among other things, relying on such a defence would create the risk of conflicting judgments. That the Anshun principle would apply was in substance the view taken by Davies JA in his dissenting judgment in Interchase [2000] 2 Qd R at 310-311 and was adopted by the primary Judge. We see no error in it.”

  1. The Full Court concluded:

“[74] In substance, the effect of the joinder orders made by the primary Judge is no different to the situation involved in the everyday case of an insured joining its insurer as a third party (by whatever procedural means may be appropriate in the particular court). This enables issues of liability and assessment of damages or compensation, both as between claimant and insured and as between insured and insurer, to be heard and determined in the one proceeding. There are obvious benefits in terms of efficiency and economy. There is no reason in modern times why form should trump substance, where the interests of justice suggest that all related issues should be resolved in a single proceeding.”

  1. I have referred to Anjin No 13 Pty Ltd v Allianz Australia Pty Ltd[18] above. That case relied upon the reasoning in Ashmere Cove and a decision of the Full Court of the Supreme Court of South Australia in JN Taylor Holdings Ltd (in liq) v Bond.[19] The analysis of earlier decisions by Vickery J in Anjin was later relied upon by Lindsay J in The Owners-Strata Plan 62658 v Mestrez Pty Ltd.[20] In that case, Lindsay J drew together the reasoning of the various, earlier cases and arrived at a set of criteria which may be used to analyse an application of this type. His Honour’s conclusions are, in my respectful opinion, consistent with the matters considered in Blakeley. He provided the following summary (which I gratefully adopt):

“[54] The reasoning underlying Anjin, and its antecedents, can be summarised as follows in an NSW context:

  1. When an insurer has denied indemnity, the insured can, uncontroversially, file a cross claim against it for the purpose of enforcing their contract.
  1. It would be an abuse of the processes of the court if a third-party Plaintiff, without a cause of action against the insurer, simply sought to join the insurer as a co-defendant with an insured defendant against which the Plaintiff had a cause of action.
  1. However, the interests of justice, and the convenient administration of justice, may authorise an order that an insurer be joined as a co-defendant with its insured, whether on the application of the third-party Plaintiff or otherwise, if:
  1. the insurer has denied liability to indemnify the insured against the Plaintiff’s claim.
  1. there is a bona fide dispute as to the entitlement of the insurer to deny liability.
  1. there is a substantial impediment (including insolvency on the part of the insured) standing in the way of the proceedings being conducted simply by the Plaintiff against the insured defendant, with a cross claim filed by the defendant against the insurer.
  1. the dispute as to the liability or otherwise of the insurer to indemnify the insured defendant can properly be made the subject of a grant of declaratory relief pursuant to the Supreme Court Act 1970 (NSW), s 75.[21]
  1. there is, in particular, a true legal controversy between the Plaintiff and the insurer such as would ensure that each of those parties might reasonably be relied upon by the court to serve as a contradictor for the other.
  1. joinder of the insurer as a co-defendant with its insured might reasonably be relied upon to avoid a multiplicity of proceedings, and to enable all matters in controversy between the parties (namely, the Plaintiff, the insured and the insurer) to be completely and finally determined.
  1. A true legal controversy between the Plaintiff and the insurer may be taken to exist where, on the facts of the particular case, there is a realistic prospect of s. 562 of the Corporations Act having scope for operation.
  1. A decision to allow joinder of the insurer as a co-defendant is one which is discretionary and fact-based, not available as of right.”
  1. By reference to that checklist, I observe that it is agreed that the insurer has denied liability.
  2. The next issue is whether there is a bona fide dispute about the entitlement to deny liability. The insurance policy excludes from indemnification:

“2. Vehicles

  Personal Injury, loss or damage caused by or arising out of the use of or operation of any vehicle that is legally required to be registered or legally required to have third party bodily injury insurance;

If indemnity is not provided by any other insurance or fund, this exclusion 2 will not apply to the insured’s liability for personal injury or property damage:

  1. arising from the actual loading, unloading; delivery or collection of goods to or from any vehicle; and
  1. arising during the Trade Use of any Vehicle at any site where the Insured is or at the Insured premises:

provided that insurance is not available while a vehicle is:

  1. travelling between locations where it is to be used for Trade Use; or
  1. used only for the transportation or haulage of goods.”
  1. In the letter from Lumley in which it declines to indemnify, it says:

“… It is evident that one of the causes of the accident is trucks or other motor vehicles dropping dirt and debris on the road. On this basis, Lumley considers that the claimant’s accident was caused by, or arose out of, the use of a motor vehicle and applying the ‘Wayne Tank principle’, believes that the policy does not respond. The Wayne Tank principle states that if there is at least one area where a claim is excluded under a policy wording then the whole claim is excluded.”

  1. Lumley went on to deny indemnity on the basis of exclusion 2 referred to above.
  2. In further correspondence, the applicant’s solicitors said that they understood that the basis for Lumley declining indemnity was that the accident fell to be dealt with under a CTP insurance as the accident arose out of the use of a motor vehicle pursuant to the Motor Accident Insurance Act 1994.
  3. It was noted in further correspondence from Lumley, that that was not the reason for declining cover. Lumley declined for reasons relating to the exclusions in the policy and not because of the application of the Motor Accident Insurance Act.
  4. The applicant also referred to a decision of Mullins J in associated proceedings for the extension of the limitation period in respect of the claim made against the fifth defendant, Keentex Pty Ltd.[22] On that application, one of the grounds raised by the fifth defendant against the extension was the assertion that the applicant had failed to comply with the MAIA. While her Honour did make comments with respect to the applicability of the MAIA, she did note that it remained open to the fifth defendant to argue whether that Act applied or not at the trial. There is, on the material, a bona fide dispute about Lumley’s entitlement to decline cover.
  5. The next issue which arises here, then, is what should be done when it appears that an insured defendant either accepts that the insurer is correct in declining to indemnify or, simply, effectively withdraws and seeks not to be further involved. Is there a substantial impediment “standing in the way of the proceedings being conducted simply by the Plaintiff against the insured defendant, with a cross claim filed by the defendant against the insurer.” The answer is “yes”, because Northbuild has declined to take any such action.
  6. For the reasons set out above, there is a true legal controversy between the applicant and Lumley such as would ensure that each of those parties might reasonably be relied upon by the court to serve as a contradictor for the other.
  7. Similarly, the joinder of Lumley as a defendant might reasonably be relied upon to avoid a multiplicity of proceedings, and to enable all matters in controversy between the parties (namely, the applicant, Northbuild and Lumley) to be completely and finally determined.
  8. The applicant does not seek to compel Northbuild to make a claim against Lumley. The reasoning used in other cases to support the making of a declaration is that, if made, it would, in effect, compel the insurer to respond favourably to a claim by the insured because it would be an abuse of process for the insured to seek to argue elsewhere that it was not liable to indemnify. The key, though, is that Northbuild would be required to make a claim. On the evidence, that seems unlikely. But, Northbuild may not be the party which can make that claim. If the applicant obtains a judgment against Northbuild, then the most likely consequence will be that Northbuild will be placed in liquidation by the applicant. In that case, there is a realistic prospect of s 562 of the Corporations Act having effect.
  9. In a situation which has some similarities to this case, the Full Court of the Supreme Court of Western Australia in Morrell v Mercantile Mutual Insurance (Australia) Ltd[23] had to consider the appropriate way to proceed where neither the natural defendant nor the corporate defendant were likely to have the capacity to meet a judgment. In that case, the Court held that the plaintiff had a “contingent right” to proceed directly against the trustee in bankruptcy of the individual to recover the amount of the liability and a similar right to proceed against the company under s 562 of the Corporations Act.
  10. Finally, r 69 has a wider application than the provision considered, for example, in Interchase. Rule 69(1)(b)(ii) provides:

“(1) The court may at any stage of a proceeding order that—

  1. any of the following persons be included as a party—
  1. a person whose presence before the court would be desirable, just and convenient to enable the court to adjudicate effectually and completely on all matters in dispute connected with the proceeding.”
  1. The reference to “matters in dispute connected with the proceeding” extends the discretionary reach of an order for joinder beyond “matters which are in dispute” in the proceeding. The issue of whether Lumley must indemnify Northbuild is a matter in dispute and is connected with the proceeding.

Orders

  1. The applicant has leave to join Lumley as a defendant. Costs are reserved. Directions will need to be made about the conduct of this matter. The applicant is to bring in minutes of order within five days of this decision being delivered.

Footnotes

[1]  Lumley has changed its name to WFI Insurance Ltd but will be referred to by the name it had at the time of the accident.

[2]  Northbuild changed its name to ACN 127 455 547 Pty Ltd in 2015. For convenience, I will refer to it as Northbuild.

[3]  Section 601AD(2) Corporations Act

[4] (2016) 259 CLR 339.

[5] Lacey v Attorney General (Qld) (2011) 242 CLR 573 at [48]

[6]  Section 79, Judiciary Act 1903 (Cth)

[7] Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120.

[8]  [2000] 2 Qd R 301.

[9]  [2000] 2 Qd R 301, 314.

[10] Blakeley at [51]

[11]  (2009) 26 VR 148.

[12]  (2016) 259 CLR 339.

[13]  [2000] 2 Qd R 301.

[14]  At 316. 

[15]  At 317.

[16]  (2008) 166 FCR 398.

[17]  (1981) 147 CLR 589

[18]  (2009) 26 VR 148.

[19]  (1993) 59 SASR 432.

[20]  [2012] NSWSC 1259.

[21]  The cognate provision in this jurisdiction is s 10 Civil Proceedings Act 2011

[22]  See Godden v State of Queensland & Ors [2016] QSC 224.

[23]  (1999) 21 WAR 451

Close

Editorial Notes

  • Published Case Name:

    Godden v State of Queensland & Ors

  • Shortened Case Name:

    Godden v State of Queensland

  • MNC:

    [2018] QSC 18

  • Court:

    QSC

  • Judge(s):

    Martin J

  • Date:

    14 Mar 2018

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2018] QSC 18 14 Mar 2018 -

Appeal Status

No Status